Brand Volkswagen pledges productivity gains by 2020

Volkswagen is targeting fixed productivity gains at its troubled core division through 2020 by pushing cost savings, stemming overseas losses and launching more higher-margin cars as the carmaker battles to overcome its emissions scandal.

Positive development at Volkswagen's namesake Volkswagen brand may continue throughout 2017, the carmaker said on Friday, building on a strong rebound in the first quarter when cost cuts helped operating profit to surge to 869 million euros ($953 million)from 73 million a year earlier even as auto sales slipped.

"The substantial restructuring programmes are bearing early fruits," Volkswagen brand chief executive Herbert Diess said at a press conference. "What's now crucially important is for us to continue along this path and work through our tasks ahead."

Investors have said a turnaround at the Volkswagen brand, which has long been saddled with high fixed and research and development costs, is key to turning the German giant into a more attractive business.

The Volkswagen brand is targeting an operating margin at the upper end of a 2.5 to 3.5 percent range this year, after 1.8 percent in 2016, with revenue expected to exceed last year's adjusted result of 74 billion euros by around 10 percent, it said.

Europe's biggest carmaker has pledged to further stem losses in North America, South America and Russia by rolling out more sport-utility vehicles (SUVs) and pushing cost savings with a goal to reach break-even in these regions by 2020, Diess said.

Volkswagen said on Friday it aims to raise productivity at its passenger-cars business by 7.5 percent in each of this year and next, and a further 5 percent in 2019 and 2020.